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Idaho’s Manufacturing Sector Gaining Strength

Manufacturing in Idaho and the rest of the United States has grown in the past four years as the economic recovery restored some of the jobs lost during the recession.

Employment in the industry plays a slightly larger role in Idaho’s economy than it does in the U.S. economy, especially in the north central and south central regions, which have seen the fastest manufacturing growth in recent years. The average Idaho worker earned $36,829 in 2013, while the average Idaho manufacturing worker earned $53,248. Manufacturers also tend to offer generous benefits packages including health insurance, paid leave and retirement. Many provide career ladders that help workers develop new skills and earn even more.

Even with the growth, U.S. manufacturing employment was nearly 1.7 million lower this August than August 2007, four months before the recession began – a 12.1 percent decrease. In the past four years, manufacturing sectors in most states recovered some but not all of the job losses. Alaska and South Dakota are the only states to gain jobs between August 2007 and August 2014.

Idaho’s manufacturing employment fell 18.9 percent between August 2007 and August 2010. Only 14 other states were hit harder. Nevada lost the most manufacturing jobs – 24.9 percent – while Alaska the least at 3.4 percent. Idaho’s high dependence on two very cyclical industries accounted for its high losses. Computer and electronics manufacturers cut 5,700 jobs while sawmills and other wood product businesses cut 3,300.

After falling 18.9 percent, Idaho’s manufacturing employment rose 12.4 percent between August 2010 and August 2013 and then fell marginally – 0.5 percent – between August 2013 and August 2014.

The net result was a 9.3 percent loss between August 2007 and this past August. Idaho ranked 21st among the 50 states for percentage change in manufacturing employment, slightly ahead of the middle of the pack.

Between the first quarter of 2010 and the same quarter four years later, 32 of Idaho’s 44 counties gained manufacturing jobs. Manufacturing grew faster in 25 Idaho counties than the nation, where it grew 5.5 percent. Adams County, where manufacturing employment rose from 26 to 142 after a lumber mill opened, had the fastest growth. Other small counties – Butte, Lewis, Boundary, Oneida and Clearwater – had growth rates above 40 percent. Twin Falls County, where the dairy industry added hundreds of jobs, grew 37.5 percent as did Jefferson County – with much of the growth coming from Idahoan Foods’ potato processing plant in Menan and Teton Outfitters’ outdoor clothing operation in Rigby.

Other counties where manufacturing increased more than 25 percent included Bonneville County, where several food processors expanded. Cives Steel opened a steel fabrication plant and Northwest Cosmetic Labs expanded its production of skin care products in Idaho Falls. Franklin County saw small expansions at a few manufacturers which led to larger percentage growth. In Nez Perce County, ammunition companies in Lewiston added hundreds of jobs and Schweitzer Engineering Laboratories opened a plant to make equipment to control electrical power systems.

Long-Term Trends

The recession intensified the long-term trend of manufacturing jobs in the United States, which has been losing manufacturing jobs since the late 1970s. Idaho’s manufacturing sector grew 5.2 percent between 1993 and 2007 while the nation’s fell 17.3 percent. The net result between 1993 and 2013 was that Idaho lost 6 percent of its manufacturing jobs while the U.S. lost 28.4 percent.

Computer and electronic products: The biggest gains in Idaho manufacturing jobs from 1993 to 2007 came from computer and electronic products – especially semiconductors – where 3,052 jobs were added, mostly in southwestern Idaho. That industry group also was the largest source of job losses after 2007, shedding 4,923 jobs by 2013. U.S. semiconductor manufacturing employment in August was 367,900 – slightly more than half of its 2001 peak of 712,800. In Idaho, semiconductor manufacturing peaked at 15,300 jobs in early 2001, fell to 11,600 by August 2007 and then plummeted to 7,500 two years later and gradually grew to 8,800 by this past August. The industry is expected to grow slowly over the next few years.

Boise-based Micron Technology Inc. has become a major maker of NAND flash memory chips, a fast-growing commodity used in smartphones and tablet computers. Micron also is working to expand into building chips for wearable and automotive devices, which it hopes will help the company weather cyclical downturns.

Food processing: Food processing lost the most jobs at 2,737 of all manufacturing industries from 1993 to 2007 as new technology reduced the number of people needed to process potatoes, vegetables and sugar beets. The J. R. Simplot Co. is replacing its potato processing plants in Caldwell, Nampa and Aberdeen with a new plant in Caldwell that can process as many potatoes with a third of the workers. The value of U.S. potato exports grew 7 percent from mid-2013 to mid-2014, according to the U.S. Potato Board.

After 2007, the growth of the dairy industry including the openings of the Glanbia cheese plant and the Chobani Greek yogurt factory – the world’s largest yogurt factory – in south central Idaho helped the food processing sector grow. That region added 950 dairy related manufacturing jobs in the past seven years. In 2008, food manufacturing overtook the computer industry as Idaho’s leading manufacturing employer.

Wood products: Job losses in Idaho’s wood products manufacturers since 1981 have been more extreme than in the nation. Changes in U.S. Forest Service policy have limited the timber available and, because Idaho and other Western states rely more on federal lands than other states, they have experienced sharper declines.

U.S. housing starts drive much of the demand for U.S. lumber, which remain far below the pre-recession average of 1.6 million a year, but has been increasing. Housing starts should continue to rise. The recession spiked unemployment rates for younger adults and resulted in a lot of pent-up demand for houses. Now that the job market has improved, many millennials may start forming households and buying houses.

Industrial demand for lumber also is improving. As manufacturers and wholesalers are shipping more products, pallets are in demand. Railroads, which have been investing heavily in their infrastructure, use ties, bridge timbers and decking. Exports have also increased, nearly doubling in the past five years, reaching $1.1 billion in 2013. Global shipments of wood products in the first half of 2014 were up 7 percent from the same period in 2013, the Wood Resource Quarterly reported.

Furniture: Furniture and related products added nearly 1,340 jobs between 1993 and 2007 and then lost 969 from 2007 to 2013. With fewer houses being built in the U.S. and with consumers still wary of purchasing big ticket items, sales of furniture, especially cabinets, have remained low. Improved consumer confidence and rising housing starts should lead to job gains for Idaho’s furniture manufacturers.

Transportation equipment: Transportation equipment manufacturers created 2,006 jobs between 1993 and 2007 then eliminated 576 jobs between 2007 and 2013. Trailer and camper manufacturers nearly doubled employment from 1,036 in 1993 to 2,010 in 2007, but between 2007 and 2013 they lost all the jobs they had added. MotivePower Inc., a spinoff of Morrison-Knudsen, designs, manufactures and re-manufactures locomotives in Boise. Its employment rose between 1993 and 2007, then fell sharply during the recession. With railroads growing throughout the U.S., Motive Power’s employment is back to its prerecession peak. Boat manufacturers in the northern, north central and southwestern regions and aircraft manufacturers in the northern region also contributed about 200 new jobs in the 20-year period.

Fabricated metal products:. Metal fabricators added 2,082 jobs between 1993 and 2007 and then added another 647 between 2007 and 2013. Almost 1,000 of those jobs came at ATK’s ammunition manufacturing operations in Lewiston, which added about 500 of those jobs after 2007. Other manufacturers of firearms and ammunition in north central Idaho added about 380 jobs since 2007. Machine shops throughout the state were the source of many of the other jobs added over the past 20 years.

Regional growth: A wide variety of manufacturers allowed Idaho’s Panhandle to add 1,607 jobs while dairy products added most of the 920 new manufacturing jobs in south central Idaho, and ammunition and firearm makers helped offset job losses in other sectors to add a net of 71 jobs in the north central part of the state. Over the 20-year period, southwestern Idaho lost 4,274 manufacturing jobs while the southeastern region shed 1,261. Eastern Idaho’s 1,179 jobs turned out to be a reclassification of 1,875 Idaho National Laboratory workers from chemical manufacturing to business services that occurred in 1994. Without the series break, eastern Idaho would have gained 696 manufacturing jobs.

Factors Affecting Idaho’s Manufacturers

Fuel prices are falling as slower economic growth in China, Japan and Europe reduce global demand for fuel. New technology has also allowed U.S. drillers to consistently increase production from fields in North Dakota and Texas, adding to global supplies. That reduces costs for many manufacturing operations and makes shipping less expensive. Lower fuel prices also free consumers to spend more.

American consumers may finally start acting on pent-up demand for high-ticket items. Their spending drives 70 percent of U.S. economic activity. Since the recession, consumers have been constrained by a poor labor market, declines in wealth caused by the housing collapse, uncertainty about the economy’s directions and stagnating wages. Now unemployment rates have dropped, the wealth decline has been made up and the economy continues to grow, but consumers still are spending less. However, that may soon shift. U.S. consumer confidence in August, as measured by the Conference Board, rose to 86 – its highest point in nearly seven years – before falling to 82.2 in September, reflecting heightened consumer concern about the job market. Falling gasoline prices and further improvements in the labor market are likely to boost consumer confidence in coming months. Faster wage growth could lead to increased consumer spending.

A weak dollar helped manufacturing grow in the U.S. over the past four years, but now the dollar is growing stronger. It has risen against many currencies in recent months. From July 1 to Sept. 30, its value rose 3.6 percent against a broad basket of currencies to a four-year high. Much of that growth was because the U.S. economy has grown stronger in the last year while many European countries are stagnating, and growth has declined sharply in Asia. The dollar is likely to grow even stronger. The International Monetary Fund updated its World Economic Outlook in October. Compared with the outlook released in July, the new forecast projected stronger economic growth in the United Sates and weaker growth in the countries using the euro, especially Germany, France and Italy. Stagnating economies in many of the countries the U.S. exports to could lead to decreased demand for U.S. manufactured goods. A stronger dollar also makes it more expensive for foreigners to buy American goods and less expensive for Americans to buy foreign goods, and that could reduce demand for American products. The Institute for Supply Management reported Oct. 3 that its barometer of manufacturing activity fell to 56.6 in September from 59 in August. The slowdown was likely a result of falling global demand and the increase in the value of the dollar.

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